Transferring Stock from an IRA

Submitted by Terrence Benton on Thu, 2022-10-13 16:10

I plan on transferring some Stock from an IRA to a normal Financial Account. My understanding is that the Stock transfers at the value of the stock on the transfer date. This creates a new start date for determining Capital Gains tax. The transfer value determines the ordinary tax at the time of future sale and the Capital Gains Tax is based on increased value only. Several questions:

1. Is this correct?
2. Is this considered part of your annual mandatory withdrawal, over age 70 1/2?
3. Does moving the Stock create a Tax Event at the date of transfer?



Submitted by Alan - IRA critic on Thu, 2022-10-13 16:47

  1. Basically correct. If multiple holdings are distributed from the IRA you will need to determine the breakdown that adds up to the 1099R Box 1 total (or the distribution value shown on your IRA statement if sooner), and provide that data to the broker to track your cost basis on each holding. Your holding period starts on the date of IRA distribution, not when the shares were purchased in the IRA.
  2. If you have an unsatisfied RMD for any of your IRAs, the amount distributed in kind will apply toward the RMD, same as if cash had been distributed. Note that RMDs now begin at age 72, no longer 70.5.
  3. Yes, you will get a 1099R showing the gross value of the distribution, reportable on lines 4a and 4b of Form 1040. If you have basis in your IRA (Form 8606), a pro rated portion of the distribution will be non taxable.
  4. If you plan to distribute the exact amount of your RMD, you will be subject to valuation changes depending on the exact time the custodian processes the distribution. That wiill usually result in being short of your RMD or exceeding it by a small amount. If you want the distribution to be exact, you need to distribute about 3% less, then do a second distribution in cash to bring the total up to your RMD amount. Or- just sell the shares in your IRA, then repurchase them in your taxable account since commissions are now very low or even 0. Then your broker will automatically know the cost basis. The downside of this is that you will be out of the market for a small time, which is better in a bear market than a bull market.

Submitted by Lydia Herz on Tue, 2022-11-08 00:30

The above answered my questions about transferring stock from an IRA to a taxable account . In my case, that also means withholding tax from the RMD which I would do by selling securities to meet tax requirements.  If I had thought about this carefully when I was contributing to IRAs, I think I should have paid the tax on the annual contribution thus having a ROTH with no need to hassle with RMDs.  

Submitted by David Mertz on Tue, 2022-11-08 01:42

Taxes cannot be withheld from an entirely in-kind distribution, so your options are to sell some of the securities within the IRA and distribute that as tax withholding while distributing the rest of the RMD in-kind, or distribute the entire RMD in-kind with no withholding and have sufficient taxes withheld from some other source of income or make an estimated tax payment.

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